Stakeholders kick over refusal of credit to SMEs

Following the recent declaration by the Governor of the Central Bank of Nigeria, Sanusi Lamido Sanusi and the Managing Director of Bank of Industry (BOI), Ms Evelyn Oputu, that banks and the BOI cannot fund small and medium scale enterprise (SMEs) in the country, some stakeholders have expressed misgivings, saying it was a disincentive to business.

While some are of the opinion that the CBN and BOI are right, others feel that failure to provide funding for small businesses will result in the collapse of the few remaining industries in the country.

Sanusi Lamido Sanusi had last Monday declared that unless governments fix the problem in the power sector and put in place policies that will enhance the growth of SMEs in the country, CBN and other banks will run away from funding small businesses.

“If you want vibrant SMEs that can borrow from banks, we must fix the power problem, we must fix the agricultural value chain problem. Banks cannot continue to lend to SMEs that are not profitable because they have to continue to run on generators and buy diesel, with bad roads and insecurity. So the environment has to be fixed and that would encourage banks to lend to SMEs,” he said.

The CBN boss further said that overheads in running a business is killing small industries thereby making banks not to have confidence in them.

On her part, the BOI boss also said since funding was not made available to the BOI by the Central bank of Nigeria to support SMEs, the industry is ‘handicapped’ in helping small industries.

Commenting on the issue, the Director General of Lagos Chamber of Commerce and Industries (LCCI), Muda Yusuf, said he is in support of the CBN stance. He argued that unless infrastructure are provided, small scale industries will continue to groan under financial crunch.

“The point CBN and BOI are making is right, unless we have valued and vibrant economy, the SMEs will continue to wobble. If the environment is not right, it is difficult to run business. Also, the experiences many banks have had with small businesses have made some of them to stop lending to SMEs. Many small businesses have collapsed with lots of them owing banks. Many of the banks too have challenges of bad loans and are struggling for survival. The issue of asset to credit is also there. The banks ask for collateral before loans are given out.”

He opined that for banks to assist SMEs, two things must be done, “Governments have to fix infrastructure that will encourage banks to lend. Secondly, banks should also be liberal when demanding for collaterals. There are too many strict collateral requirements which discourage small industries to borrow from banks.”

Dr. Ayo Teriba, an economist, said SMEs should be funded, but added that if there is credit crunch, all aspects of the economy will be affected rule out the issue of credit crunch.

“They (SMEs) are distributor to the economy and should be well funded. If we have credit crunch, it is going to affect all sectors of the economy. Though we had it two years ago, if there is liquidity improvement in the system, that means the economy is coming back.

The Managing Director of Arthur Financial and Investment Company, Mr Arthur Onyema, is of the opinion that if small industries are left with no financial assistance from governments and banks, the rate of unemployment which is already affecting the economy will continue to increase.

Mr Iyewumi Oyeleke, the Managing Director of Iyewumi Foam, a foam manufacturing company also faulted the CBN. “I have been in this business for the past 20 years, yet the company is functioning with staff. I don’t believe because necessary things have not been put in place by the government, then banks should refuse to lend to SMEs. Many of the banks are not really sincere to help small industries because of their own selfish gains. They prefer to lend to big companies, most especially in the oil sector. Those big companies that the banks lend to also face the same problems that small industries are facing, yet banks prefer to do business with them. “

Echoing similar sentiments, Mr Afolabi Ehinmowo, who runs a financial investment company and a former bank official, is of the view that the current economy does not encourage banks to lend to SMEs.